Tuesday, 20 August 2013

Business Environment, Stock Market and Financial Profitability

Financial profitability, environmental sustainability and social equity are the three new pillars that hold an organization in a stable form. These are like base that builds profit for the organization in the long term. This philosophy helps to make strategic financial plans so as to increase the profitability. These factors help to drive the customers, investors and employees to make investments with the firm.

Business environment:The term business environment is composed of two words – business and environment. In order to understand this term, you need to understand it by breaking the two words from the term. The first is business which means any act that keeps a person or group of person engaged in some task which may be done with the motive of gaining profit. The next word environment is the term that is used to refer the surroundings. Surroundings refer to the social, legal, political, economic, and institutional scenario that affects the functioning of the organization. Business environment has two components:

1.      Internal Environment: Internal environment include material, men, management and machinery which are under the control of the business but can bring positive and negative effect on business and its functioning. By bringing changes in the functioning of the business it can affect the profitability of the firm.

2.      External Environment: External factors are those that are beyond the control of business and are role players in proper functioning of the business. These factors include Geo-Physical Factors, Government Factors, Political Factors, Demo-Graphic Factors, Sociology-Cultural Factors, etc.

Financial Profitability: Plans to Increase It

Profitability of a firm depends on various factors and without proper research and taking appropriate action, you cannot expect your desired goal. Strategic planning are therefore made. These plans are made by the business so as to make more profit from the business that are dealing with. Proper acceptance of those strategies would help in short as well as long term financial benefit. The strategy concentrates on certain crucial factors that are responsible for bringing changes into the financial condition of the firm. It shows you a clear vision of the present state of the company and future goal. Once you are aware of the present condition and the final goal, it becomes easier for you to make plans and work accordingly so that you reach your goal on time. Factors like the financial resources available, current practices, policies followed, success rate of policies, competition, etc., are taken into consideration. Keeping all these factors in concern, the company plans its further actions so that it can make out profits.

Strategic planning works on the below mentioned facts

·         Organization’s goal

·         Present resources

·         Usage of resources

·         Competitors in the market

·         Company’s business environment

The primary intension behind developing a strategic plan to reach to a certain goal. The managers of the organization work in the specific fields for proper execution of the plan. Although the factors mentioned above are from different departments of a business, all the managers from different departments need to make a coordinated attempt to fulfill their needs. This includes all the possible business areas like team management needs, staffing, sales, R&D, marketing, finance, accounting, etc. As all these departments work together for business benefit, they all need to work in coordination for proper execution of the plan.

How are these plans useful in financial profitability?

·         Acts as a base to make decisions

·         Assist in monitoring the performance of the firm

·         It shows a clear view of the present company status

·         The findings can be used as a blueprint for further developments

·         It finds the loopholes in the business processes

Making strategic plans is necessary for every business as it helps to find the problems and acts as a factor to be relied upon while making improvements. Financial profitability is greatly dependent on these plans as the sole intention behind all pain is to increase the financial profits. Business environment plays an important role in deciding the revenue generated by a company.